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A small manufacturer will need to determine if it can afford to take on a big order to make and supply products to a valued customer. The business should take these steps:

1. Prepare a simple cash flow forecast, showing cash inflows and outflows over the contract period. Anticipate shortfalls well in advance – a shortage of cash three months into production could put an end to the project.
2. Arrange with the customer to give stage payments. Or, take the forecast to the bank and arrange a loan to cover any temporary shortfall.
3. Keep a sharp lookout for other problem areas of cash flow:

• rising costs
• a rise in interest rates
• late delivery of raw materials, or production delays due to industrial action, which could delay stage payments
• customer’s postponement of delivery date, leading to loss of revenue
• customer’s late payment

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